
Sign up & start saving!
Get our weekly newsletter for the latest in money news, credit card offers + more ways to save
Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.
Updated
Normally, when you deposit your money into a bank account, the bank pays you interest on your deposit. Negative interest rates are the opposite — depositing money attracts a fee, but you get discounts when you borrow.
Since the Global Financial Crisis (GFC) the world’s understanding of finance has changed rapidly. One idea that has emerged from the GFC is implementing negative interest rates. Negative interest rates are incentives for banks. The bank holds reserves and these are taxed by the negative interest rate, so the bank has higher incentives to lend out its reserves.
A few countries have said goodbye to zero interest rate policies (ZIRP) and hello to negative interest rate policies (NIRP). Switzerland was one of the first countries to implement NIRP in the 1970s in an attempt to deter a flood of foreign investment.
Right now, it probably doesn’t. While commercial banks get to decide what interest rates to offer customers, those rates are usually based on the federal funds rate set by the Federal Reserve. While interest rates dropped to nearly zero in 2008, at the time of writing, the US has never used negative interest rates.
However, some economists think that it’s time to jump on board with the growing global trend. Pushing interest rates into negative territory could induce more spending and borrowing, stimulating the economy. Implementing a negative interest rate is an attempt to inject more liquidity — more cash — back into markets and ward off deflation.
The US banking system continues to benefit from strong overall asset performance. Rising home prices have forced more mortgage lending, which is particularly important to banking stability. Interest rates in the country have also risen as the economy has started to recover from the Global Financial Crisis. However, if they dip back down in the future, the Federal Reserve could decide to implement a negative interest rate. If they did, it would be up to your bank to decide whether or not charge its own negative interest rates.
Check today’s best interest rates
A negative interest rate could be a way to stimulate the economy, but so far it isn’t something we’ve tried out in the US. Economists are divided over whether or not it would be a good idea — it would encourage spending and inject cash into the market, but it would also make it more difficult for people to save. That being said, even if the federal funds rate dips below zero in the future, there’s no guarantee that banks would pass that savings on to you.
Picture: Shutterstock
Back to topThese international banks offer accounts with 12% APYs or higher, but watch out for risks.
Learn how this online crowdfunding investing platform lets you invest in small businesses throughout the country.
Borrowers are taking advantage of forbearance rather than paying down their debt, and lenders are being extra selective in approving new loans.
A membership with the CommunityWide Federal Credit Union gives you access to high interest CDs.
We break down the best choice based on features, fees, complaints and other metrics.
Finder speaks with investment experts from around the world about what investing looks like in a post-COVID-19 world.
Those under age 18 enjoy no monthly fees or minimum balance requirements on their savings.
Deferring repayments can ease financial strain right now, but it will cost you in the long run.
You won’t pay interest for at least 60 days on federal loans. But what about private student loans?
This bill includes personal checks, expanded unemployment benefits, business financing and more.